WHOA: Europe's 'New Fiscal Compact' Could Be Adopted Almost Immediately

Europe may have a highly technical way to fast-track a "new
fiscal compact" to control debts and deficits, according to a
report by European Council President Herman Van Rompuy and obtained by FT blogger Joshua Chaffin.

In fact, all such changes would require is unanimous approval of
EU leaders after consultation with the European Parliament and
the European Central Bank. That's because all
they might need for an immediate compact would be revision of a
single stipulation (Protocol 12) of the existing EU treaty.

Here's what these changes would include:

"Ensuring that excessive deficits are avoided and that
debt is brought down below 60%." In other
words, a (virtually) balanced budget rule for
countries.

"The obligation for euro area Member States to include such a
[balanced budget] rule in their national legal
systems, preferably at constitutional or equivalent
level."

"The Court of Justice would have jurisdiction to
control the transposition of this rule at national
level."

"An automatic correction mechanism (for
example automatic reductions in expenditures, increases in
taxes or a combination of both), to be specified by each
Member State, in case of deviation."

Euro area states would have to submit their budgets ahead of
time to some central monitoring organization.

This proposal could be undertaken ahead of or simultaneously with
more substantial treaty change to enhance the power of central
regulatory institutions on budgets.

Van Rompuy's report also leaves open the possibility of eurobonds
in the future, something the French and German governments
adamantly opposed in a press conference on Monday.

Rapid implementation of such proposals could go a long way
towards ensuring that struggling peripheral sovereigns will be
forced to repay their debts, though it might not stop the
speculative momentum currently aimed at Italy and Spain.